CNK head indicted over diamond fraud case

Prosecutors said Sunday they indicted CNK chief Oh Deok-gyun on the charge of spreading false rumors about the company’s diamond mine to manipulate its stock prices and pocket illegal profits.

Oh, 48, allegedly reaped about 90 million won ($86 million) by inflating his company’s stock prices by releasing false statements about the volume of diamond reserves in CNK’s Cameroon mine, according to the Seoul Central District Prosecutors’ Office.

He was arrested last month after hiding in Cameroon for two years.

While Oh had claimed that the mine was worth billions of dollars, investigators found that the company has failed to produce a commercially viable diamond since acquiring developer rights in December 2010. Even if the company had exported 2,100 carats of gemstones as it claimed, the stones’ value would only amount to about 450 million won at most.

They also dismissed the company’s claim that the mine holds some 416 million carats of diamond reserves as “groundless.”

Last week, investigators found that Oh had sold more than half of his stake in the mine to a Chinese company for $30 million, effectively turning over its management.

Oh was accused of falsely testifying at a parliamentary audit in 2011 that a team of 40 people had been working in the area for six years.

A 54-year-old high-ranking official of CNK was also indicted without physical detention for taking part in the stock manipulation.

Oh’s indictment caps a years-long investigation that kicked off when the Securities and Futures Commission filed a complaint against the entrepreneur in January 2012, accusing him of exaggerating the diamond reserves in the Cameroon mine.

Some of the blame fell on former president Lee Myung-bak’s administration, as it is believed to have played a significant role in promoting the deal.

After the government publicly confirmed CNK’s claim, the company’s stock price skyrocketed from some 3,000 won to 16,000 won within a month. A subsequent announcement by the Foreign Ministry in June 2011 reaffirmed the diamond reserves estimate, which was again followed by a surge in the stock price.

Former Energy and Resources Ambassador Kim Eun-seok and other government officials are currently being tried on suspicion of taking part in the diamond mine fraud.